Hospitals’ Revenues Lagging, Unions Flagging

One of the under reported causes of the high cost of health facilities, especially hospitals and nursing homes, is the high rate of unionization in the sector. In the glory days of spending growth, unions staged great campaigns to organize healthcare workers. Conflict erupted, for example, between the California Nurses Association and the Service Employees International Union to sign up nurses.

After Obamacare, things are different. Moody’s recently reported that non-profit hospitals’ top-line revenue growth was just 3.9 percent last year, an “all-time low.” For many businesses, 3.9 percent revenue growth in the Obama economy would be relatively rosy. However, it’s not what hospitals are used to:

The slowdown in revenue growth to 3.9% was a significant drop from the 5.1% growth recorded in 2012 and from historical growth rates that routinely exceeded exceeded 7.0%.

“We expect revenue growth will remain under pressure in 2014,” says Moody’s Analyst Jennifer Ewing. “We expect continued financial weakening due to volume declines in a predominantly fee for service environment, reinforcing our negative outlook on business conditions for not-for-profit hospitals.”

Unions are responding to the pressure with their usual tactics — such as striking. According to Modern Healthcare, reporting research conducted by Paul M. Lazes of Cornell University:

…Cornell’s Lazes has studied what the healthcare industry can learn from the auto industry. The short answer: Unions have to be viewed as adding value, not serving as a stumbling block.

Union members agree, and they say they believe they’re well-positioned to weather this period of industry change.

Hmm. If unionized healthcare workers are going to respond to decline and disruption in their industry the same way unionized autoworkers did in theirs, we are going to have an even more painful transition than I thought.

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